FDI in retail

Hello there,

With FDI in retail being approved, I was curious about the general feelings of the farming community here. Do we think it is for the good or things will go from bad to worse!

On one side I tend to think, that it will be beneficial where in farmers will have more options to sell to these big retailers directly and the whole nine yards but on the other hand I worry abt the monopoly down the road.

Looking forward  to hear from you all and there by hoping to clear my pre-notions and look at the bigger picture.

Regards
Biju

From what i have read all over, it is a good thing from a consumers perspective…
What needs to be seen is how beneficial would it be for providers. FDI in retail is bound to bring in a drastic change in the way the final produce is collected / processed /sold.
We would not see the impact immediately, and infact the inital few years it may work out to the benefit of the farmers.
But in a few years time (or may be a decade), there would be only a few established players who will then start dictating… “We either buy at X price, or we dont buy at all”.
Given that the other structures (read middle man, the small grocerry shops, the local sabjiwala) would have closed down due to inability to compete with the huge chains due to pricing, farmers may not be left with lot many options.

Just came across this interesting article in thehindu.com:

For U.S. President Barack Obama there could be nothing more cheering. The ‘underachiever’ now goes to the presidential polls with a lot of confidence — India’s decision to open up FDI in multi-brand retail comes as a shot in the arm for the beleaguered American economy and will obviously boost his poll prospects.

Mr. Obama certainly knows what is good for the U.S. economy; Prime Minister Manmohan Singh also knows what is in America’s interest. Mr. Obama, for instance, wanted to stop outsourcing to protect U.S. jobs. No amount of persuasion from India changed his mind. Similarly, knowing how important FDI in retail is for him, he had pitched for a new wave of economic reforms. It was surprising to see Mr. Obama telling India what is good for us.

Aided and abetted by TIME magazine and credit rating agencies like Standard&Poor’s, Fitch and Moody’s, India finally buckled under global pressure. What is little known is that India was also under a G-20 obligation to remove all hurdles to the growth of multi-brand retail.

But is FDI in retail really good for India? Will it improve rural infrastructure, reduce wastage of agricultural produce, and enable farmers to get a better price for their crops? While a lot has been said and written about the virtues of big retail, let me make an attempt to answer some of the big claims.

Agriculture: The Prime Minister has repeatedly projected FDI in retail as a boon for agriculture. Unfortunately, this is not true. Even in the U.S., big retail has not helped farmers — it is federal support that makes agriculture profitable. In its last Farm Bill in 2008, the U.S. made a provision of $307 billion for agriculture for the next five years. .

Where is the justification for such massive support if big retail was providing farmers better prices? And let us not forget, despite these subsidies studies have shown that one farmer in Europe quits agriculture every minute.

The second argument is that big retail will squeeze out middleman and therefore provide a better price to farmers. This is again not borne by facts. In the U.S., some studies have shown that the net income of farmers has come down from 70 per cent in the early 20th century to less than four per cent in 2005.

This is because big retail actually brings in a new battery of middlemen — quality controller, standardiser, certification agency, processor, packaging consultants etc. It is these middlemen who walk away with the profits and the farmer is left to survive on the subsidy dole.

Monopolistic power enables these companies to go in for predatory pricing. Empirical studies have shown that consumer prices in supermarkets in Latin America, Africa and Asia have remained higher than the open market by 20 to 30 per cent.

And finally, the argument that multi-brand retail will provide adequate scientific storage and thereby save millions of tonnes of food grains from rotting. I don’t know where in the world big retail has provided backend grain storage facilities?

FDI is already allowed in storage, and no investment has come in. Let it also be known that even the 30-per-cent local sourcing clause for single-brand retail has already been challenged and quietly put in cold storage by the Ministry of Commerce.

Employment: The Indian retail market is estimated to be around $400 billion with more than 12 million retailers employing 40 million people. Ironically, Wal-Mart’s turnover is also around $420 billion, but it employs only 2.1 million people. If Wal-Mart can achieve the same turnover with hardly a fraction of the workforce employed by the Indian retail sector, how do we expect big retail to create jobs? It is the Indian retail sector which is a much bigger employer, and big retail will only destroy millions of livelihoods.

State government’s prerogative: Very cleverly, the Central government has allowed the State governments the final say in allowing FDI in retail. This may to some extent pacify those State governments opposed to big retail. However, the industry is upbeat and knows well that as per international trade norms, member countries have to provide national treatment. Being a signatory to Bilateral Investment promotion and Protection Agreements (BIPAs), India has to provide national treatment to the investors. Agreements with more than 70 countries have already been signed. State governments will, therefore, have to open up for big retail. Industries will use the legal option to force the States to comply.

And more importantly, let us look at how the virus of big retail spreads, even if the promise is to keep it confined to major cities. Recently, a New York Times expose showed how Wal-Mart had captured nearly 50 per cent of Mexico’s retail market in 10 years. What is important here is that as per the NYT disclosure “the Mexican subsidiary of Wal-Mart, which opened 431 stores in 2011, had paid bribes and an internal enquiry into the matter has been suppressed at corporate headquarters in Arkansas”.

In India, we are aware that Wal-Mart alone had spent Rs.52 crore in two years to lobby, as per a disclosure statement made in the U.S. It has certainly paid off.

SOURCE: thehindu.com/opinion/op-ed/a … 897906.ece

I work in London and came across so many news that european and american dairy farmers are making loss.

Let’s say AMUL is selling milk @ Rs.42/litre and WALMART will start selling at Rs.40/litre, so eventually there will be a competition and at the end farmers won’t make profit on their produce.

views welcome!

FDI will not benefit farmers on any case because for one single, simple, reason the prices are fixed by the purchaser and not by the famers, this applies for all their products.

If Farmer can think he can earn more than that of any other business establishments as farmer may not incur more expenditure like organization for value addition of their product. I earned such income by eliminating the middle men and selling my products with requisite value addition at high rates than when it was sold at farm or any other market. Even after my earnings was high in my point of calculation, but the rate which I sold was cheap for the consumers comparing to other retail sales person/store.

Unless and until farmer decide to eliminate the middlemen, getting benefits will be unsure.

Unless farmer take initiative to rule the market, middlemen will not think of farmer welfare. Farmers only think of their own welfare including fixing price for their own products. Farmers should acquire 3 stages i.e. Producer, self marketing in bulk and retail directly to retailers & consumer to maximize his returns from his products.

Yes Swamy, you are absolutely right. Producer should be the ‘king’ and should have the power to fix the price. Avoiding middle man is the key to reap the maximum benefit. Our govt should also come up with minimum support price for every produce and also open up procurement centers (not APMC yards controlled by agents and traders etc) at panchayat levels.

Regards
Biju

Hi?
Today is Bharth bundh for various reasons.
Direct FDI, Subsidy cut in LPG cylinders, Hike in Diesel price etc are the reasons for Bundh. As on now 75 to 95% bundh is reported.
Bundh is successful in urban area for small business establishments to big businesses.
But nothing is stopping for small business people like road side or temporary shop owners on foot path etc.

Today we have got extra order for our agri produce Pudhina which we sold at Rs.4/- for handful bunch of pudhina as we have direct dealing with retailer.
Whenever we unable to sell our product on our direct involvement, we supply the produce to retailers but not middlemen or whole seller. 

My brother who went to supply milk to town got deal/demand for pudhina offer at 8.am in this morning, Immediately brother passed the information to harvest about 75 bunches of pudhina to our people residing at Farm and reached to farm at 8.30. 9. am 75 bunches of pudhina was ready and supplied to retailer at 9.20 and got Rs.200/- @ 4 rs for bunch. The said bunch was sold to consumer @ 5 to 6 Rs.

Nothing was stopped us to sell our product with proper plan even on all India bundh. This is what a Farmer should have art of survive at any adverse conditions to enjoy the farming life. One should deeply involve himself in agriculture to enjoy farming and its miracle on every moment.
 

Yes, I accept that farmer should take the initiative, but due to labor problem the farmer is not able to sell his product directly to the customer. Here he falls prey to the middlemen who comes to his farm to pick up the products in the beginning, later on starts to dictate terms. Unless until a person gets in to the shoes of a full time farmer, full time farmer means he should do all the farming work with help from labors and not stay somewhere else and doing farming as an addition income, people will not know the effects of farming. 

Please note that we are facing power, rain, water, labour shortages to generate this income. We residing at Farm. Farm is about 5 kms from town. We sell if time permits, if not will supply only to retailer by eliminating middlemen and whole seller. We use our own transportation of bike for less quantity products. We have not availed any bank loan or subsidy as we don’t want to depend any others than our expertise and physical powers graced by our mother earth.   

Sir, I am a full time farmer, please tell me how many farmers in your village do this. Only a handful will do this. You say you are 5 kms away from town, my farm is 50 kms from my farm but I still do what you do. If all farmers do this then there is no need for wholesaler or retailer.

Hi?
Wishing you success, If all farmers take serious note and actions to face the FDI from foreigners, nothing can stop us to gain what we required and we can perfectly withstand with FDI etc.